★ Does each customer earn back what they cost to acquire?
LTV:CAC Ratio Calculator
Calculate your LTV:CAC ratio from ARPA, gross margin, churn and CAC. See how it compares with the widely cited 3:1 benchmark.
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Monthly.
Fully loaded cost to acquire one customer.
Your LTV:CAC
3.6 : 1
Healthy
- LTV: $3,200. CAC: $900.
LTV:CAC = [(ARPA × gross margin) ÷ monthly churn] ÷ CAC
LTV:CAC: 3.6 : 1.
Ratio off? It's usually churn on one side and paid acquisition on the other. I work on both from the product side.
How it works
LTV is the gross profit a customer brings in over their lifetime. CAC is what you paid to get them. The ratio says how many times over a customer pays back their acquisition cost.
A ratio below 1 means every new customer loses money. Between 1 and 3, the business works on paper but leaves little room for overhead and mistakes.
Worked example
The same $120/month product, 80% margin and 3% monthly churn, now paying $900 to acquire each customer.
| Input | Value |
|---|---|
| Average revenue per account | $120 |
| Gross margin | 80.0% |
| Monthly churn | 3.0% |
| CAC | $900 |
| LTV:CAC | 3.6 : 1 |
That lands in the healthy band. Change any input above to run your own numbers.
Benchmarks
The 3:1 target comes from David Skok, who argues that healthy SaaS businesses have an LTV at least three times their CAC. A ratio far above it can also mean you are growing slower than you could afford to.
| LTV:CAC | Reading |
|---|---|
| under 1:1 | Losing money on every customer |
| 1:1 to 3:1 | Below the 3:1 rule of thumb |
| 3:1 to 5:1 | Healthy |
| 5:1 and above | Healthy, possibly under-investing in growth |
How to improve it
- Attack churn first: it raises LTV and the effect compounds.
- Raise prices or move customers to annual plans.
- Shift budget from the channel with the worst paid CAC to the best one.
- Add expansion revenue so accounts grow after they sign.
Questions founders actually ask
What is a good LTV:CAC ratio?
Can LTV:CAC be too high?
Should I use blended or paid CAC?
How reliable is LTV:CAC for an early-stage startup?
Related metrics
More from the workbench
Fine print
Tools: on the house.
Engineer: by the hour.
Moving them is the expensive part, and the part I'm good at: activation flows, upsell moments and the product work behind better numbers.
I'm Himanshu, an AI and full-stack engineer. I build MVPs, AI agents and the growth plumbing around them for early-stage startups.